May 2010 Federal Budget
* the temporary reduction in co-contributions announced in the last budget (ie
, co-contributions are at most 100% of the members own contributions) has been made permanent. The previous intention to progressively increase this back to 150% by 1 July 2014 has been scrapped. The income threshold at which the maximum co-contribution applies has also been frozen for both 2010/11 and 2011/12 (rather than indexed each year) at $31,920. The same applies to the income threshold at which it ceases to apply altogether ($61,920);
* the law will be changed to allow the ATO to exercise its discretion in relation to excess contributions tax before (rather than only after) an assessment for the tax has been issued. Unfortunately, there was no change to the contribution cap rules themselves, nor was there any extension of the circumstances under which the ATO is able to exercise this discretion. In practical terms, the rules remain as unwieldy and poorly targeted as before;
* amendments will also be introduced to allow funds to claim deductions for insurance that pays a benefit when a member meets the new condition of release a terminal medical condition. This doesntt make any further changes to the circumstances under which benefits can be paid, it just allows funds to insure them tax effectively;
* the announcements made in March 2010 regarding superannuation borrowing were re-affirmed. In particular, changes will be made to the law to ensure that when a superannuation fund buys an asset using borrowed money, the fund will be treated as the ultimate owner of that asset for tax purposes. The Government has also undertaken (in its March announcement) to consult further on other changes required to the borrowing rules (or provide guidance on the current legislation) to give funds greater certainty when applying these provisions.
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by: Graham Parkes
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